The basics of health insurance subrogation and reimbursement.

Most people don’t know about subrogation, but everyone who has health insurance should. Subrogation means, roughy, that if someone else injures you and your health insurance pays your medical bills, then your health plan has the right to “stand in your shoes” as an injured party and pursue a claim against whoever hurt you. The closely related concept of Reimbursement is contractual in nature: when you agree to accept benefits from your insurance company, you agree to repay those benefits if you receive a settlement from or verdict against the one that hurt you. For an excellent, well sourced, and technical discussion of the ins and outs of health insurance subrogation, read this analysis prepared by major consulting and accounting firm Deloitte. Prepared in 2013, it is slightly out of date and does not include some recent changes in this area of the law, but in general health insurance subrogation rights have grown stronger, not weaker, over the last two decades.

I happen to know this area of law very well and, because most supporting references are legal in nature and/or not publicly available, I do not plan to include extensive links to other resources. Many law firms already have written about subrogation and reimbursement in their bids to attract clients who have been in accidents. Their angle is that they can protect you from your health insurance company’s attempts to recover its money after you receive your settlement. And indeed, they have an ethical duty to try, but their ability to protect you depends on several factors such as the state you live in and the type of health plan you have, and additional factors that may be totally beyond your control [e.g., the policy limits of the person who caused your injuries]. With rare exception, the health insurance companies do get their money back (or at least as much as they can if there is not enough settlement money to go around). Click here for a great example of the types of explanations that law firms prepare for potential clients.

I don’t have (or want) a lawyer. How should I handle any subrogation issues?

Let’s say you are in a car accident, break your leg, take an ambulance to the hospital, and spend three months recovering, all the while incurring various medical bills. The accident was the other driver’s fault, and you have opened up a bodily injury claim against his or her insurer. Because your accident was not too terribly severe, you decide to go it alone without the help of an attorney. What can you do to reduce the amount you might have to pay back in a health insurance subrogation claim?

First things first, do not sign any releases or accept any quick settlements.

This pile of cash can quickly disappear through health insurance subrogation if you are not careful.

In addition to usually representing less value than you could achieve by doing some work, collecting your expenses, and presenting that material to the car insurance company, you could “lock yourself in” to a settlement that does not leave you with enough money to pay back your health plan.

Make sure to tell your health plan you were in an accident; your insurance contract requires you to. If you do not actively pick up the phone to call, you can expect a letter in the mail asking you whether your medical treatments were the result of an accident. These letters are not from law firms trolling for clients [they do not have access to your medical data]. They are from your health insurance company or its subrogation vendor, and you received one because your treatment is consistent with other accident victims’ treatments. You can trust that these letters are legitimate, and you ignore them at your peril.

Health plans can–and do–demand repayment from patients who settled with the car insurance company before making the health plan aware of the claim, even if the settlement was so low that repaying the health plan leaves the patient with little to no money. Do not let yourself wind up in this very unpleasant situation.

Find out what state you live in, AND what state the accident happened in.

This part is pretty easy. You know where you live, And your accident probably took place in the same state. In general, a subrogation claim must follow the law of the state in which the accident occurred, while your reimbursement obligation depends on the law of the state in which you reside. If the accident occurred in another state, it is probably best to hire a lawyer to help with your claim, because now you are dealing with (at least) two bodies of potentially conflicting law.

If you live in New York, New Jersey, Connecticut, Virginia, North Carolina, Georgia, Colorado, Missouri, Arizona, or California, you may be able to pay less (or nothing at all) due to strong consumer protection laws regarding health insurance subrogation. An attorney can help answer this question for you.

Understanding your health insurance policy is critical in subrogation

Find out what type of health insurance plan you have.

This part can be trickier, but does not have to be. If you receive your health insurance through your employer, just ask your Human Resources or Benefits department. They will know. You are trying to determine whether your health plan is self-funded or fully insured, because that will affect your health plan’s recovery rights. A self-insured plan is one in which your employer merely hires an insurance company to process and administer claims, but the actual pot of money to pay claims comes out of your employer’s pocket. A fully insured plan is a more traditional plan where you and your employer pay premiums to an insurance company, and the insurance company takes the risk of you becoming sick or injured and pays the medical bills with insurance funds, rather than the employer’s own money.

If you have a self-funded plan, you should consult with a lawyer and consider hiring one to pursue your claim for you, because those plans have often have stronger rights under state law, especially if you work for a public entity (school system, utility company, etc.) in the consumer protection states I mentioned above. Additionally, federal law has carved out very important exceptions for many self funded plans’ subrogation rights which may allow them to preempt state consumer preemption laws entirely.

Do not assume you have a fully insured plan because your employer withholds “insurance premiums” from your paycheck. These look exactly the same whether the plan is fully insured or self-funded. Just ask. Or, for those not faint of heart, read your Summary Plan Description.

Federal Employee and Medicare Plans.

If you are a federal employee or are on Medicare, just do yourself a huge favor and hire a lawyer to pursue your claim for you. These plans generally preempt state law, and the policy language itself will largely determine what, if any, reimbursement obligation you have. An attorney can review that language for you.

Ok, so now what?

Refer to step one: call your health insurance company to make them aware of the accident.

If you live in one of the consumer protection states I listed above, you have a fully insured health plan, and you are not a federal employee or Medicare recipient, you may not need to pay anything back to your health insurance company at all, and you will not need a lawyer get you that outcome. This is also true for individual health plans not provided by your employer, such as Obamacare plans. You should still make your health plan aware of the accident. They will tell you whether they intend to pursue reimbursement after reviewing the relevant state law where you live.

If you live anywhere else, or have any other type of plan, consider hiring an attorney. The complexities are real, and an attorney can help navigate you to a successful resolution that not only gets you money from the person who hurt you, but also repays your health plan enough so that it will release any further reimbursement claim against you.

Finally, do not ask me to be your attorney. I’m not taking clients at the moment, and with the line of work I do, I would probably be ethically conflicted from representing you.

That’s it: health insurance subrogation in a nutshell. It is a very big nutshell with lots of material inside, but it is navigable with the help of an attorney and, sometimes, even on your own.